Alpha Insights

An oil-driven inflation shock collided with a softening labor market in the first quarter, leaving the Federal Reserve on hold and longer-term rates stubbornly elevated.

As the US labor market continues to weaken, the CRE environment experienced climbing delinquencies as loans matured at a time asset values moved well below recent peaks.

The US labor market has shown definitive signs of weakening, leading to guarded monetary easing.

Tariffs introduced earlier in the year have weighed on sentiment and inflation expectations and are contributing to growing strain across the economy.

Economic fundamentals remained steady during the first quarter of 2025, however, immense concerns about tariffs and trade wars have created an uncertain outlook for inflation and economic growth.

US economic strength and growth surprised to the upside over the course of 2024, resulting in an updated yearend forecast of more restrictive monetary policy through fewer rate cuts in 2025.

The Federal Reserve’s September rate cut sends a strong signal that the Fed is starting to loosen its grip on restrictive monetary policy. The pace of easing, however, remains uncertain.

A cooling labor market and consumer spending reverting to historical norms demonstrate progress towards the Fed’s goal of inflation sustainably moving lower.

Strong first quarter inflation, combined with a robust labor market, has tempered expectations for the timing and magnitude of rate cuts in 2024.

2023 ended with stronger than predicted economic growth, low unemployment, and moderating inflation. Although consumers and businesses feel better about the economy compared to the start of last year, there remain risks to economic growth and inflation. At the same time, the CRE market continued to cool, with lower transaction volume & pricing.